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What Is a Contingent Liability?

Answer:

  • A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or

  • A present obligation that arises from past events but is not recognized because:
    • It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
    • The amount of the obligation cannot be measured with sufficient reliability.

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